Know why you need to keep gold jewellery purchase invoices safe for tax purposes

Gold jewellery purchases are generally high-value transactions and most of the times people keep the bill safe for their own record. They may want to refer it on a later date to confirm the weight of gold or price at which they bought or the date at which they bought.

However, there is another benefit to it. It helps in explaining the source of gold in case there is verification done by the tax officials.

“A person buying or investing in gold jewellery or bullion or coins should keep the tax invoices and preserve them as evidence of purchase. The invoices will enable verification of the weight of the gold and verification of the price paid against the income of the purchaser,” said Archit Gupta, Founder, and CEO, Cleartax.

“In such cases, a person maintaining the invoices need not worry about explaining the source of the gold purchases. It would further help the case of a taxpayer who regularly files an income tax return in addition to retaining invoices for gold purchases,” he added.

Also, if your income is above a certain level you need to disclose the gold holdings along with other assets in your income tax return. Therefore, having a proof of the gold purchases helps in explaining the source of gold.

“In the case of a taxpayer whose total income is above ₹50 lakh, the gold holdings are reported in ‘Schedule AL’ of the ITR, and can hence be tracked year on year,” said, Archit Gupta of Cleartax.

“In case of residents having foreign assets the documents (proofs) can be asked for verification up to 16 years by income tax office. Hence, if you have gold outside India than filing ITR with declaration is necessary in schedule foreign asset.,” said Sudhir Kaushik, chief financial officer, Taxspanner.com.

Limit of gold you can hold

There is no limit on gold jewellery or ornaments you can hold, CBDT had clarified with a circular in 2016. However, one needs to explain the source of the income from which the jewellery is purchased. There is also no limit on the gold jewellery you can inherit.

The circular also provides for the limit of gold jewellery or ornaments, which will not be seized in case of a tax raid even if it is not matching the income of the person.

“Jewellery and ornaments to the extent of 500 grams for married lady, 250 grams for unmarried lady and 100 grams for male member will not be seized, even if prima facie, it does not seem to be matching with the income record of the assesse,” said the circular.

As per the circular, the tax official may not even seize even higher quantity of gold jewellery based on factors including family customs and traditions.

“It is important to note that the limits prescribed above apply only to jewellery held by members of the family. In the case of jewellery found belonging to any other person, the same can be seized and confiscated,” said Gupta.

How to show source of gold jewellery as inheritance?

“In the case of inherited gold, where the gold is obtained otherwise than by purchase, the taxpayer would need to furnish a copy of the gift deed, settlement deed or will. A taxpayer may also furnish copies of original invoices if available,”said Gupta of Cleartax.

“However, if a taxpayer is unable to furnish any documentary evidence, the tax authorities would consider the family customs, social status and so on for determining the source of the gold,” he added.

Courtesy: Livemint